SEC Files Charges Against NovaTech in $650 Million Crypto Fraud

Author

Hongji Feng

Author

Hongji Feng

About Author

Hongji is a crypto and tech reporter. He graduated from Northwestern University’s Medill School of Journalism with a Bachelor’s and a Master’s. He has previously interned at HTX (Huobi Global),…

Share

Last updated:

August 12, 2024 04:54 EDT

Why Trust Cryptonews

With over a decade of crypto coverage, Cryptonews delivers authoritative insights you can rely on. Our veteran team of journalists and analysts combines in-depth market knowledge with hands-on testing of blockchain technologies. We maintain strict editorial standards, ensuring factual accuracy and impartial reporting on both established cryptocurrencies and emerging projects. Our longstanding presence in the industry and commitment to quality journalism make Cryptonews a trusted source in the dynamic world of digital assets. Read more about Cryptonews

The U.S. Securities and Exchange Commission (SEC) has filed charges against NovaTech and its principals for orchestrating a $650 million crypto fraud.

According to a press release published by the SEC, the fraudulent scheme involved a multi-level marketing structure where NovaTech falsely promised safe investments in crypto and foreign exchange markets, impacting over 200,000 investors globally.

The funds collected were used to pay existing investors and commissions, while millions were siphoned off by the company’s leaders, Cynthia and Eddy Petion.

The Commission also charged promoters Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley, accusing them of actively recruiting investors and downplaying red flags to advance NovaTech’s scheme.

The SEC’s complaint revealed that the founders ran NovaTech as a multi-level marketing (MLM) and crypto asset investment scheme from 2019 to 2023.

They attracted investors by promising that their funds would be used in crypto and foreign exchange markets. Cynthia Petion assured investors their funds were secure, promising profits from day one with immediate access to capital.

In reality, NovaTech primarily used investor funds to pay off earlier investors and to provide commissions to promoters. Only a small fraction of the funds went into actual trading. The complaint also alleged that the Petions diverted millions of dollars for their personal use.

When NovaTech collapsed, many investors, including a large number of Haitian-Americans, were unable to withdraw their funds, suffering significant financial losses. The complaint underscored how this scheme inflicted severe economic damage on specific communities.

“NovaTech and the Petions caused untold losses to tens of thousands of victims around the world,” said Director of the SEC’s Fort Worth Regional Office Eric Werner.

“As we allege, MLM schemes of this size require promoters to fuel them, and today’s action demonstrates that we will hold accountable not just the principal architects of these massive schemes, but also promoters who spread their fraud by unlawfully soliciting victims,” said Werner.